To anticipate that the market is entering a **trading range**, watch for the following early signs based on Al Brooks' price action strategies:
1. **Initial Doji Bar**: If the first bar of the day is a doji, it increases the chance of a trading range day because it reflects uncertainty and a lack of directional conviction.
2. **Multiple Reversals**: If there are **4-5 reversals** within the first hour of trading, this is a strong clue that the market is shifting into a range-bound mode. This two-sided trading behavior shows that neither bulls nor bears are gaining control.
3. **Weak Follow-Through**: When strong trend bars (bullish or bearish) lack follow-through in subsequent bars, it indicates that the market is not trending strongly and is more likely to stay range-bound.
4. **Tails and Overlapping Bars**: Look for: - **Bars with prominent tails** (indicating rejection of highs/lows). - **Bar overlap** of 50% or more with previous bars. - **Doji bars** appearing frequently, as they signal indecision.
5. **Price Hovering Around the Moving Average**: If the price frequently crosses the moving average and the moving average becomes relatively flat, it often indicates a developing trading range.
6. **Failure of Breakouts**: Early breakout attempts (above or below prior highs/lows) that fail to sustain momentum and reverse back into the range signal the market is rejecting trends.
7. **Spike and Channel Pattern**: If a strong spike is followed by a shallow or sideways **channel**, this often serves as the first leg of a trading range.
8. **Lack of Momentum**: In trends, pullbacks are shallow and strong. In trading ranges, price action slows, moves horizontally, and legs subdivide into smaller two-legged moves.
### Summary: Focus on reversals, bar overlap, failed breakouts, and lack of directional momentum within the first hour to spot a trading range early. Combining these signals improves your ability to switch to **range trading strategies**, such as fading the extremes of the range.
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